House of Commons - Public Accounts - Appendices to the Minutes of Evidence

Select Committee on Public Accounts Appendices to the Minutes of Evidence

Annex B

RESOURCE ACCOUNTS FOR 1998-99 AND 1999-2000: COMPARISON OF AUDIT OPINIONS

Department (Indicates accounts prepared under a Treasury dispensation)*	1998-99 Accounts Audit Opinion	1999-2000 Accounts Audit Opinion	1999-2000 Accounts Date Laid	1999-2000 Accounts (HC 2000-01/ or Cm No) [24]
Departments that received an unqualified audit opinion for 1998-99 and 1999-2000 1. Armed Forces Pension Scheme	Unqualified	Unqualified	13 December 2000	HC4
2. Crown Estates Agency	Unqualified	Unqualified	31 January 2001	HC192
3. Department of Culture, Media and Sport	Unqualified	Unqualified	31 January 2001	HC181
4. Department for Education and Employment	Unqualified	Unqualified	31 January 2001	HC182
5. Department of National Savings	Unqualified	Unqualified	2 November 2000	HC830
6. Department of Trade and Industry	Unqualified	Unqualified	20 December 2000	HC11
7. DTI/UKAEA Pension Scheme	Unqualified	Unqualified	20 December 2000	HC10
8. Government Actuary's Department	Unqualified	Unqualified	31 January 2001	HC153
9. HM Customs and Excise	Unqualified	Unqualified	31 January 2001	HC165
10. Inland Revenue	Unqualified	Unqualified	24 January 2001	HC129
11. Intervention Board Executive Agency	Unqualified	Unqualified	9 November 2000	HC833
12. National Investment and Loans Office	Unqualified	Unqualified	22 November 2000	HC798
13. Northern Ireland Court Service	Unqualified	Unqualified	31 January 2001	HC199
14. Northern Ireland Office*	Unqualified	Unqualified	30 March 2001	Cm 5058
15. OFSTED	Unqualified	Unqualified	25 January 2001	HC155
16. Office for National Statistics	Unqualified	Unqualified	31 January 2001	HC185
17. Privy Council Office	Unqualified	Unqualified	31 January 2001	HC197
18. Principal Civil Service Pension Scheme*	Unqualified	Unqualified	30 March 2001	Cm 5061
19. Public Records Office	Unqualified	Unqualified	25 January 2001	HC134
20. Serious Fraud Office	Unqualified	Unqualified	31 January 2001	HC198
TOTAL		20
New accounts that received an unqualified opinion for 1999-2000 21. DfID Overseas Superannuation Scheme	Not applicable	Unqualified	31 January 2001	HC187
22. Forestry Commission Pension Scheme	Not applicable	Unqualified	31 January 2001	HC201
23. Scotland Office	Not applicable	Unqualified	31 January 2001	HC186
TOTAL		3
Departments that received a qualified opinion for 1998-99 but an unqualified opinion for 1999-2000 24. Office of Gas and Electricity Markets (OFGEM)	Disclaimer and disagreement	Unqualified	20 December 2000	HC24
25. Charity Commission	Adverse	Unqualified	31 January 2001	HC191
26. Crown Prosecution Service	Adverse	Unqualified	31 January 2001	HC193
27. Central Office for Information	Disagreement	Unqualified	31 January 2001	HC190
28. Department for International Development	Disagreement	Unqualified	31 January 2001	HC116
29. Office of Telecommunications (OFTEL)	Disagreement	Unqualified	31 January 2001	HC151
30. Office of Water Services (OFWAT)	Disagreement	Unqualified	31 January 2001	HC176
31. Office of the Rail Regulator (ORR)	Disagreement	Unqualified	31 January 2001	HC184
32. Wales Office	Disagreement	Unqualified	24 January 2001	HC96
33. Export Credits Guarantee Department	Scope limitation	Unqualified	20 December 2000	HC51
34. Foreign and Commonwealth Office	Scope limitation	Unqualified	31 January 2001	HC195
35. National Health Service Pension	Scope limitation	Unqualified	31 January 2001	HC188
36. Office of Fair Trading	Scope limitation	Unqualified	31 January 2001	HC75
37. Teachers' Pension Scheme	Scope limitation	Unqualified	31 January 2000	HC189
TOTAL		14

Departments that received a qualified opinion for 1998-99 and for 1999-2000, but nonetheless "improved"

38.  Treasury Solicitor's Department*

Nil opinion
Problems were so severe that a full account could not be produced. Scope Limitation
Lack of evidence (not all audit explanations obtained and unable to ascertain whether proper accounting records had been attained) to support the "adverse costs" liabilities. 30 March 2001 Cm 5060

39.  Department of Health

Disclaimer
Insufficient audit evidence on opening balances for significant assets and liabilities; absence of detailed information regarding composition of health authority balances; and failure to eliminate significant intra-group transactions and balances. Insufficiently developed accounting system and data collection procedures, and incomplete valuation reports for the retained estate. Scope Limitation
Insufficient assurance as to the accuracy of in-year movements of the retained estate, due to lack of evidence to support the opening valuation.
Lack of evidence on expenditure and provisions for clinical negligence liabilities, relating to valuation of the opening liabilities, lack of discounting, and not using the "expected value" method.
Other problems resolved. 31 January 2001 HC194

40.  Ministry of Defence

Disclaimer
There were concerns over the valuation of certain categories of fixed assets.
Also, there were inadequate audit trails to support some balances had relating to stock, debtors, prepayments, creditors and accruals.
In addition, the resulting uncertainties over the contents of Schedule 3 (the balance sheet) cast significant doubts as to the accuracy of the amounts of income and expenditure and cash flows disclosed in Schedules 1, 2, 4 and 5. Disclaimer
The problems for 1998-99 were still unresolved, but some progress had been made.
The evidence available to support balances disclosed in Schedule 3 was inadequate and as a consequence there was doubt over the accuracy of amounts disclosed in Schedules 1, 2, 4 and 5—relating specifically to stock consumption, depreciation charge and interest on capital.
In addition, there was non-compliance with the Treasury's Resource Accounting Manual (RAM and Financial Reporting Standard (FRS) 15.

In 1999-2000, the department did not comply with the requirement in the FRS that where a tangible fixed asset comprises two or more major components with substantially different economic lives, those components should be accounted for separately for depreciation purposes. 31 January 2001 HC50

41.  Cabinet Office*

Disclaimer
The disclaimer arose because the Department did not have adequate systems to identify debtors, prepayment, creditors and accruals.
In addition, tangible fixed assets had been overstated due to a disposal.
Heritage and gifted assets totalling £8.1 million had been omitted.
Two accounts/divisions—the Securities Facilities Executive and the Securities Facilities Division—had not been consolidated. Scope Limitation
Cabinet Office core department did not have in place appropriate systems to identify all relevant prepayments and accruals, which meant that opening balances for 1 April 1999 could not be determined accurately.
An absence of supporting information in relation to assets and liabilities taken on by the Security Facilities Division (SFD) meant that opening balances for 1 April 1999 could not be accurately determined which cast doubt on the accuracy of SFD transactions in The Operating Cost Statement. 30 March 2001 Cm 5053

42.  HM Treasury

Adverse
Subscriptions to International Financial Institutions, of at least £6,000 million had been excluded from the balance sheet. Scope Limitation
There was insufficient audit evidence relating to the amounts included in the balance sheet for furniture, fittings and equipment fixed assets. This was because the fixed asset inventory had not been updated or reconciled to the financial records.
The treatment of Subscriptions to International Financial Institutions, which remain excluded from the accounts, is to be considered further in the context of Whole of Government Accounts and a review of the boundary of the Treasury's resource account. 30 March 2001 Cm 5062

43.  DETR*

Disagreement
Qualification was due to an undisclosed fundamental uncertainty over the valuation of the QE II Conference Centre. There was also insufficient evidence to support land liabilities, assets held for resale and stock.
There was insufficient evidence to support the intention to proceed with various road building schemes, although they had been included in the "assets under construction" figure.
Also lack of audit evidence for valuation of stocks, resale assets and lands liabilities. Disagreement
Disagreement over the accounting treatment of £980 million of new lanes or sections of road built under Design, Build, Finance and Operate schemes.
These have been treated as assets of the operators, rather than the department, with DETR recognising a reversionary interest. However, the department has not provided sufficient evidence to support the views that the new and old parts of the road are distinct assets.
Also inadequate records to support liabilities relating to land and property acquisitions. 30 March 2001 Cm 5054

44.  Lord Chancellor's Department

Disagreement and scope limitation
Disagreement due to department not recognising full liability of criminal legal aid in ongoing cases at the balance sheet date and failure to recognise grants paid and payable at the earlier date.
Limitation in scope due to failure to adjust operating costs in respect of grants paid and payable in the correct period.

Also problems in ascertaining the completeness of opening creditors and accruals as these were derived by manual returns.
Insufficient documentary evidence had been retained to support assertions used which were used to develop an estimate of accrued expenditure relating to legal aid liability.
Also, a failure to complete an accurate inventory of antique furniture, which had not been valued. Scope Limitation
Limitations in the evidence available to support LCD's estimate of its liability for expenditure on legal aid in the higher criminal courts. This is due to limitations in the assumptions used by the model to estimate liabilities.
Irregularity—insufficient evidence to confirm that magistrates' courts have properly applied the statutory regulations relating to criminal legal aid. This is a longstanding qualification on the department's appropriation account. 30 March 2001 Cm 5056

45.  Forestry Commission

Scope Limitation
Schedule 5 allocation across six objectives. This did not reflect the actual activity by objective during 1998-99.
Also, negative balances were shown in the Revaluation Reserve, which is contrary to accounting standards. Scope Limitation
The Forestry Commission was unable to reconcile overall net cash expenditure to total funds received from the UK and Scottish Parliaments, leaving an overall imbalance of £1.9 million. 31 January 2001 HC196

46.  Security and Intelligence Agencies*

Scope limitation and Nil opinion
Security Service and Secret Intelligence Service—
Completeness and valuation of fixed assets problem. Scope limitation re GCHQ
GCHQ qualification—
A consequence of the weak opening balance position flowing from the deficiencies in the 1998-99 resource account.
Work not yet completed on fully resolving problem areas in both date quality and processes, notably fully substantiating the asset register. 4 April 2001 Cm 5059

47.  Department of Social Security

Scope Limitation
Limited evidence as no system controls over benefit prepayments, overpayments and other debtors, and also benefit accruals, encashment control and third party payments. Scope Limitation
As for 1998-99. Unable to validate debtor and creditor balances:

—  poor accounting information in the benefit administration system,

—  a lack of regular reconciliations to independent evidence,

—  significant adjustments made in the consolidation process.

Also unable to confirm the valuation of prepayments and accruals to records.
Uncertainty over the encashment control creditor relating to the system not being able to capture all order books and girocheques issued to claimants.
The compensation recoveries debtor and creditors have been omitted from the balance sheet.
The programme costs include a material level of fraud and error. 31 January 2001 HC183

TOTAL 10

Departments that received an adverse opinion for 1998-99 but a disclaimer of opinion for 1999-2000

48. Home Office*

Adverse (with scope limitation)
Incorrect recognition of grants.
Failure to evaluate the proper accounting treatment for three secure training centres, procured under PFI.
Insufficient evidence supporting the amounts recognised for certain IT equipment, debtors, creditors, provisions and reconciliation of the cash consumption in the Resource Account to the Appropriation Account figure. Disclaimer
Inconsistencies between the primary financial statements and the notes regarding the reported cash movements;
a lack of reconciliation of the resource accounts to the department's appropriation acount; an unsupported "correcting" item; errors and omissions in balances brought forward at the beginning of the financial year; the double counting of certain expenditure;
a lack of evidence to support amounts reported for certain fixed assets and to show that the relevant accounting standard had been properly applied;
errors in the apportionment of operating costs to Schedule 5—the "Statement of Resources by Departmental Aim and Objective"; and
failure to recognise grants payable in the manner required by the Resource Accounting Manual. 30 March 2001 Cm 5055

49. Ministry of Agriculture, Fisheries and Food*

Adverse
Non compliance with RAM relating to debtors.
Creditors amount was misstated.
Insufficient evidence to support IT assets, contingent liabilities and other commitments.
Disagreement with the accounting policy for IT assets, and furniture and fittings.
Schedule 5 was not available for audit. Disclaimer
The Ministry could not provide adequate assurance as to the completeness of the fixed asset register, particularly relating to IT assets.
Also, there was insufficient evidence to confirm the date of introduction into use and anticipated useful life for some software products developed internally.
The Ministry failed to follow the accounting policy on capitalising assets and could not adequately support their revenue expenditure.
They also failed to deal properly with transactions and balances between the department and its agencies.
The Ministry had failed to follow its accounting policy relating to income and expenditure on European Union grants and subsidies schemes as soon as the claimant had met the conditions during 1998-99.
Therefore, as no further evidence was available to support these balances, this cast doubt on the accuracy of income and expenditure for 1999-00. The closing balances have been correctly disclosed.
Regularity—the Summary of Resource Outturn includes expenditure of £308,778, which was not covered by Parliamentary authority.
(This also affected the department's appropriation account.) 30 March 2001 Cm 5057